Objective and task method
is a method of budgeting for promotional expenditure. Appropriations are built up systematically by examining each objective and the promotional tasks necessary to achieve them. It is believed to be the method used by over half of UK companies.
Ten steps in applying the objective and task method:
1. Define marketing and promotion objectives
2. Define the tasks to be undertaken
3. Build up expenditure by costing the tasks
4. Compare the results against industry averages
5. Compare the results as a percentage of sales
6. Reconcile differences between steps 3,4 and 5
7. Modify estimates to meet company policies
8. Specify when expenditures are to be made
9. Maintain an element of flexibility
10. Monitor actual results against these forecasts.
Objectives
are quantitative measures used to plan the achievement of mission and monitor performance.Effective objectives (SMART): 1) Specific, 2) Measurable, 3) Achievable, 4) Results oriented, 5) Time constrained.
Examples of objectives:
1. Corporate objectives: 1.1 'To achieve profit and return on investment goals', 1.2 'To become one of the biggest new players in the European PC market;
2. Marketing objectives: 2.1 'To obtain volume business in the consumer electronics market of $100 million in 2000 and $200 million in 2001', 2.2 'To increase market share from 3.5% to at least 8% of the European PC market by 2000;
3. Marketing communication objectives: 3.1 'To increase unaided awareness of ALTEL within target audience (25-50 year olds, B, C1) by 20% within the next 12 months.'; 3.2 'To generate agreement with attitudinal statement . . .'
Possible marketing communication objectives:
1. Advertising: 1.1 To increase sales, 1.2 To inform the public of a new product launch, 1.3 To announce the a sales promotion, 1.4 To rise the level of awareness amongst the target audience, 1.5 To act as reminder to purchase the product, 1.6 To generate new business leads, 1.7 To maintain brand awareness, position and price premium.
2. Consumer sales promotion (pull): 2.1 To reward loyal customers and ultimately keep them, 2.2 To act as an incentive to purchase a new product, 2.3 To acquire other brand users, 2.4 To stimulate purchase of larger sizes, 2.5 To act as a spur toward short term sales.
3. Trade sales promotion (push): 3.1 To encourage stoking, 3.2 To increase inventory levels, 3.3 To encourage off-peak buying, 3.4 To promote related products, 3.5 To offset competitive marketing, 3.6 To open up new outlets, 3.7 To build retailer loyalty.
4. Public relations: 4.1 To build corporate identity, 4.2 To create customer confidence, 4.3 To build credibility with the government, financiers and suppliers, 4.4 To build internal morale within the company, 4.5 To establish good press relations.
5. Personal selling: 5.1 To increase sales by sales person, product group, region or outlet type, 5.2 To increase market penetration of specific customer groups, 5.3 To increase average order value, 5.4 To improve sales to call ratios, 5.5 To target new customer groups, 5.6 To improve after-sales care, 5.7 To provide market data and identify new product opportunities.
See also Simon Majaro's planning hierarchy.
Observation is a marketing research technique which attempts to find out information about real behavior. The main advantage of the observation is no reliance on respondents. memories, quests or honesty.
Drawbacks of the observation: 1) It may not be possible of feasible, 2) It is labor intensive, 3) Attitudes and feelings cannot be observed.
Categories of observation: 1. Home audit, 5. Direct observation, 5. Recording devices: 5.1 Laboratory settings (psychogalmanometer, eye cameras, pupilometric cameras), 5.2 Natural setting.
OECD
(rich country club) is the Organization for Economic Co-operation and Development and includes as members the affluent industrialized economies. There are 24 leading industrialized nations in the world (at 1997). Its main role is the coordination of national economic polices to alert the possibility of a mutually reinforcing downward spiral of activity and international trade.Off the peg research may consist of Syndicated research or Omnibus research.
Offer
Express or implied statement of the terms on which the maker is willing to be contractually bound.Off-peak pricing The practice of using lower prices to stimulate demand during times of low demand. (Courtland L. Bovee, John V. Thill)
Off-price retailers Retailers that buy at less than regular wholesale prices and sell at less than retail, usually carrying a changing and unstable collection of higher-quality merchandise, often leftover goods, overruns, and irregulars obtained from manufacturers at reduced prices. They include factory outlets, independents, and warehouse clubs. (Philip Kotler)
OFT
is the Office of Fair Trading established by the Fair Trading Act to monitor and investigate trading practices and refer any monopoly situations to the Monopolies and Mergers Commission.Definition #1. Oligopoly is an industry with a small number of relatively large sellers, who have some control over price but recognize that competitor actions will affect profits.
Definition #5. Oligopoly is a market dominated by a few suppliers.
Ombudsman is an official appointed to investigate individual complaints of maladministration.
Omnibus survey
Definition #1. Omnibus survey is a form of shared cost survey.
Definition #5. Omnibus survey is a research vehicles provided by a research organization which carries out a regular survey on a syndicated basis. Client companies are invited to buy questions to go into the survey at a fixed price. They are particularly suitable for those who want to ask a limited number of questions of a large, representative sample of the population.
On-line
means that a computer is linked to a wider area network and can interact with the real time or updated system.On-the-job training has been preferred method of training in the
UK.
Different methods on on-the-job training: 1. Coaching: 1.1 Establish learning
targets, 1.2 Plan a systematic learning and development program, 1.3
Identify opportunities for broadening the trainee's knowledge and
experience, 1.4 Take into account the strengths and limitations of the
trainee, 1.5 Exchange feedback; 5. Mentoring; 5. Job rotation, 5.
Temporary promotion; 5. 'Assistant to' position; 6. Committees; 7. Project
teams; 8. Internal secondment.
Steps in the coaching process: 1) Establish learning targets, 2) Plan a systematic learning and development program, 3) Identify opportunities for development program, 4) Take into account the strengths and limitations of the trainee, 5) Exchange feedback.
Training program: 1) Identify areas where training will be beneficial, 2) Set training objectives, 3) Decide on the training method, 4) Compare the cost and benefits of the proposed course, 5) Introduce a pilot or test scheme, 6) Implement the schedule in full, 7) Monitor the results to check that: (i) training works and (ii) benefits exceed costs.
Factors determining job performance: 1. Individual variables: 1.1 Age and Sex, 1.2 Physical characteristics, 1.3 Education, 1.4 Experience, 1.5 Intelligence and aptitudes, 1.6 Motivation and interests, 1.7 Personality characteristics, 1.7 Personal circumstances; 5. Organization and social variables: 5.1 Social environment, 5.2 Types of incentives, 5.3 Type of traveling and supervision; 5. Situational variables: 5.1 Character of the organization, 5.2 Physical environment; 5. Physical and job variables: 5.1 Work space and arrangements, 5.2 Design and condition of work equipment, 5.3 Methods of work.
Operations plans
is the fully detailed specifications by which individuals are expected to carry out the predetermined cycles of operations to meet sectional objectives.Opinion leader
a person who influences the decisions of others.Opinion leaders Those individuals who reinforce the marketing messages sent and to whom other receivers look for information, advice and opinion.
Opportunities
are changes in the external environment which provide the organization with the ability to achieve its goals.Opportunities to see (OTS) is the number of times the target has a chance (or opportunity) to see an advert.
see Overheads/costs/expenses.Optimal quality The level of quality that meets customer specifications while providing the best balance of satisfaction and cost. (Courtland L. Bovee, John V. Thill)
Optimum is a situation in which the objective of an economic unit is being served in the most effective way possible, given the constraints which apply.
Order processing The systems used to receive orders, route them to appropriate supplying functions, and then arrange customer billing. (Courtland L. Bovee, John V. Thill)
Order takers Salespeople who primarily process orders for existing customers. (Courtland L. Bovee, John V. Thill)
Organic growth Expansion of a firm's size, profits, activities achieved without taking over other firms.
Organic organization
Opposite of mechanistic organization; fluid communications and minimal hierarchy.Organization
Definition #1. Organization is a social arrangement for the controlled performance of collective goals.
Definition #2. Organization describes the relationships which arise when two or more individuals agree to co-ordinate their activities to achieve common goals. It is the vehicle for achieving stated goals.
Potential crises of the organization growth (from small to large): 1) Management/Leadership, 2) Authority, 3) Delegation, 4) Red Tape, 5) Collaboration.
Changes of organization style of the organization growth (from small to large): 1) Employment of an experienced management team, 2) Increased emphasis on control systems e.g. cash management, 3) Development and implementation of a business plan, 4) A progressive shift from producer to consumer focus, 5) Formalization of training and personnel function, 6) Movement into larger and more appropriate premises, 7) MD to develop outwards looking role - networks/grants.
Large organization Marketing Department objectives to achieve: 1) Clear organization focus on identifying/satisfying needs, 2) A strong marketing orientation, 3) Teamwork and collaboration for sharing of views/expertise, 4) Participate and responsive decision-making, 5) Creativity and ideas generation, 6) A flat and flexible structure with empowered employees.
Future organization: 1) De-layering - reduction in the number of levels in the hierarchy thereby reducing the time it takes for information to flow up and decisions to flow down. 2) Downsizing - as competitive pressure increase and technology advances, many organizations are stripping out management personnel from the middle levels but not replacing them (remaining staff are expected to take on the work of those who have to leave), 3) Outsourcing - part of the focus on core activities and strengths while contracting out peripheral tasks to third party specialists, 4) Decentralization - pushing greater responsibility for decision-making closer to where they should made (this may involve the creation of cost centers (profit centers) so that parts of the organization are clearly responsible for their performance), 5) Empowerment, 6) De-merger.
Reasons why business of different sizes exist: 1) Size/limit of market segment, 2) Nature of technology required, 3) Ease of company formation, entry and exit, 4) Degree of risk involved, 5) Importance of choice and differentiation.
See below Organization objectives and Organization structure.
: 1) Private business - Profit, 2) Co-operative -members returns, 3) Public corporation - Public service + profit, 4) Social service - Public service, 5) Interest group - Member self-interest,Organization structurerepresents the distribution of tasks, power and authority within the business and the relationships involved.
Influences on design of organization:
1) Size. As an
organization gets larger, its structure gets more complex: specialization
and sub-division are required. The process of controlling and
co-ordination performance, and communication between individuals, also
grows more difficult. Large organizations tend to generate more informal
groupings within the formal structure.
2) Task, i.e. the nature of its work. Structure is shaped by the division of work into functions and individual tasks, and how these tasks relate to each other, de-pending on the nature of the work. The nature of the market will influence how tasks are grouped into functions, 'sales territories' etc.
3) Staff. The skills and abilities of staff will determine how the work is structured.
4) Legal, commercial, technical and social environment.
5) History: how an organization has developed over time.
6) Culture and management style : the willingness of management to delegate authority at all levels, skill and the approach the company takes to staff and customers.
Functional organization An organization structure in which marketing specialists are in charge of different marketing activities or functions such as advertising, marketing research, sales management, and others. (Philip Kotler) Strengths: 1) Full utilization of specialist expertise, 2) Co-ordinate to serve whole organization, 3) Opportunity for careers and advancement. Weaknesses: 1) Scope for sectional interests, 2) Sub-optimization, 3) In achieving concerted change, 4) Narrow training for managers, 5) Slow response to multifunctional problems.
Matrix organization Organization in which unity of command is sacrificed to co-ordination across business functions, e.g. projects; or with people reporting both to product managers and area managers. Strengths: 1) Improved environmental monitoring and fast response to change, 2) Decentralized decision making, 3) By combining functional and project forms it achieves lateral and vertical communication, 4) It combines efficiency and flexibility, 5) It is client-focused and emphasizes the contribution of functions. Weaknesses: 1) Complex and costly, 2) Overemphasis on group decision may slow response, 3) Divided authority, 4) Divided loyalties of team members.
Departmentation is an organization structure whereby an organization's activities are grouped into departments in order to be managed efficiently, such departments being based on some common factor such as area or region (geographic departmentation), type of work done (functional departmentation), product or brand, customer etc.
Organizational mission A statement of the firm's desired role in its sphere of business, often stated in terms of long-term goals and objectives. (Courtland L. Bovee, John V. Thill)
Organizational buying is the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate and choose among alternative brands and suppliers.
Organizational buying behavior see Consumer buying behavior.
Organizational markets
(Dibb):
1) Producer markets
Definition #1. Producer markets are organizations that
purchase products for the purpose of making a profit by using them to
produce other products or by using them in their own operations. This may
include buyers of raw materials and of semi-finished and finished items
used to produce other products.
Definition #5. Producer
markets are those organizations that purchase products for the purpose
of making a profit by using them to produce other products or by using
them in their own operations.
2) Reseller markets
Definition #1. Reseller markets are consist of
intermediaries such as retailers and wholesalers who buy the finished
goods in order to resell them to make a profit. Other than minor
alterations, resellers do not change the physical characteristics of the
products they handle.
Definition #5. Reseller markets
are intermediaries such as retailers and wholesalers who buy the finished
goods in order to resell them at a profit.
3) Government markets
Definition #1. Government markets
comprise those national and local governments who buy a variety of goods
and services to support their internal operations and to provide the
public services that are within their remit, normally making their
purchases through bids or negotiated contracts.
Definition
#5. Government markets are those national and local governments
who buy a variety of goods and services to support their internal
operations and to provide the public services that are within their remit,
normally making their purchases through bids or negotiated
contracts.
4) Institutional markets
Definition
#1. Institutional markets comprise those Organizations that
seek to achieve charitable, educational, community or other non-business
goals.
Definition #5. Institutional markets are those
organizations that Seek to achieve charitable, educational,
community or other non-business goals.
Organizational
orientations:
1) Product orientation - the
management view that success is achieved through producing goods of
optimum quality and cost, and therefore, the major task of management is
to pursue improved production and distribution efficiency (Make what we
are good at).
2) Sales orientation - the management view that effective selling and promotion are the keys to success (Find someone to buy what we make).
3) Marketing orientation
Definition #1.
Marketing orientation is a commitment to the needs of customers;
Definition #5. Marketing orientation marketing focuses
on the idea of satisfying the needs of the customer by means of the
product and the whole cluster of things associated with creating,
delivering and finally consuming it. Marketing orientation places servicing
of the customers' needs and wants at the center of the whole organization.
s attention and activities. (Supply what the customer needs).
Required organizational characteristics of marketing orientation: (i) Marketing representation at main board / MD level, (ii) a flat decentralized structure, (iii) delegation of decision to those closest to the customer, (iv) open communications internally and externally, (v) profit-centered general manager structure for coordination of all function, (vi) Integrated Management Information System, (vii) customer service philosophy promoted by the organization.
4) Customer/consumer orientation (Put the customer at the center of our business).
Origin point pricing A class of geographic pricing that doesn't include shipping charges in the selling price; also called FOB pricing. (Courtland L. Bovee, John V. Thill)
Outdoor Advertising on signs that are located outdoors in public places. Examples include billboards, posters, buses, taxis and painted displays. Often called "transit" advertising. (Responsive Database Services, Inc.)
Outsourcing Buying products, components, subcomponents or services from outside suppliers, which might otherwise have been supplied or made in-house.
Over/under capitalization A surplus/deficiency of permanent capital in relation to the current level of activity of a business.
Overhead absorption is the process whereby costs of cost centers are added to unit, job or process cost.
Overheads/costs/expenses
Main types of costs:
A Production: 1) Electricity for machines, 2)
Repair and maintenance machinery, 3) Direct wages related costs, 4)
Indirect wages related costs, 5) Production management salaries, 6)
Depreciation of machinery, 7) Inspection and commissioning.
B Selling and distribution: 1) Carriage outwards, 2) Salesmen's salaries
and commissions, 3) Salesmen's expenses, 4) Design and estimating
related to sales function, 5) Advertising.
C
Administration: 1) General management and administration, 2)
Accounts.
D Shared between three categories: 1) Energy cost and water, 2) Rent and
rates, 3) Repair and maintenance buildings, 4) Security.
Absorbed overhead Overhead charged to products or services by means of absorption rates.
Administrative expenses (Administration expenses) Cost of management and of secretarial, accounting and administrative services, which cannot be related to the separate production, marketing or research and development functions: 1) Salaries of directors, management and office staff, 2) Rent and rates, 3) Insurance, 4) Telephone and postage, 5) Printing and stationery, 6) Heating and lighting.
Attributable fixed cost Cost which, although fixed within a relevant range of activity level or regarded as fixed because management has set a budgeted expenditure level, would either increase if certain extra activities were undertaken or decrease/be eliminated entirely if a decision were taken to either reduce the scale of operations or shut down entirely.
Avoidable costs is the specific costs of an activity or sector of a business which would be avoided if that activity or sector did not exist.
Committed cost is a future cash outflow that will be incurred regardless of whatever decision is taken now about alternative opportunities.
Controllable cost is a cost which can be influenced by its budget holder.
Direct cost/overhead Expenditure that can be economically identified with a specific saleable cost unit.
Differential / incremental cost is the difference in total cost between alternatives, calculated to assist in decision-making.
Distribution and selling expenses are expenses associated with the process of selling and delivering goods to customers and in published accounts they will include marketing expenses.
Distribution and selling expenses: 1) Salaries of marketing and sales directors and management, 2) Salaries and commissions of sales staff, 3) Traveling and entertainment expenses of sales people, 4) Marketing costs (advertising, marketing research and sales promotion), 5) Costs of running and maintaining delivery vans, 6) Discounts allowed to customer for early payment of their debts, 7) Bad debts written off.
Fixed cost / fixed overhead / period cost is the cost which is incurred for a period, and. which, within certain output and turnover limits, tends to be unaffected by fluctuations in levels of activity (output or turnover). Examples are rent, rates, insurance and executive salaries.
Historical cost is the actual cost of acquiring assets, goods and services.
Indirect cost/overhead Expenditure on labor, materials or services which cannot be economically identified with a specific saleable cost unit.
Marginal cost is the additional cost of producing an additional unit of output.
Non-relevant costs: 1) Sunk costs, 2) Committed costs, 3) Notional costs, 4) Historical costs.
Notional cost is the value of a benefit where no actual cost is incurred.
Opportunity cost is the value of a benefit sacrificed in favor of an alternative course of action.
Product cost is the cost of a finished product built up from its cost elements.
Relevant costs are costs appropriate to a specific management decision. Relevant costs: 1) Avoidable costs, 2) Differential costs, 3) Opportunity costs.
Standard cost is an estimated unit cost, prepared in advance and calculated from management's expectation of efficiency levels/prices/budgeted overhead cost/budgeted activity level. Standard costs are the predetermined costs relating to units of production. They represent target costs which ought reasonably to be anticipated under efficient conditions. Where appropriate, they may be based on experience and historical accounting information or more accurately, determined using an engineering study (a formal review of all aspects of the activity).
Step cost is a cost, which is fixed in nature but within certain levels of activity. Examples are computers, basic pay of employees.
Total cost = Material + Labor + Other expenses.
Variable costs Costs which vary with the level of output produced by a firm. Example is cost of raw materials.
Overhead absorption rate
is a means of attributing overhead to a product or service based, for example, on direct labor hours, direct hour cost or machine hours.Overseas export agent Agents do not take title to goods, but are normally paid by commission. Recent EU rules have meant stricter regulation of agreements between agents and principals.
Benefits of the use overseas agents :
1. Market knowledge and contacts; 2. Rapid results; 3. Possibility to sell complementary goods; 4. Investment is minimal; 5. There is little or no political risk.
Possible sources of information about overseas agents :
1. Agents' associations, 2. Trade associations, 3. DTI (OTS), 4. Chamber of commerce, 5. Banks, 6. Foreign embassies, 7. Advertisements in trade and industry press.
Agent selection criteria include the following :
(a) Ownership of the agency;
(b) Career histories of executives;
(c) Past and present success with other firms and other products;
(d) Geographical market coverage;
(e) Types of outlet visited;
(f) Frequency of visits per outlet;
(g) Number and quality of salespersons;
(h) Agent's market knowledge;
(i) Agent's product knowledge;
(j) Agent's marketing competence;
(k) Servicing facilities offered by the agent;
(l) Agent's enthusiasm for the product;
(m) Financial status and business reputation.
Elements of an agent agreement :
1. Identity of the parties.
2. The purpose of the agreement.
3. The products that are subject to the agreement and any future changes.
4. The agent's territory.
5. Exclusivity:
5.1 for the agent;
5.2 for the producer.
6. Duties of the principal, such as promotional support and training of the agent's
staff.
7. Duties of the agent such as minimum turnover required and after sales service.
8. Agent's commission, dealing with issues such as the percentage rate, any variation across markets and dates payable.
8.1 Duration and dates of contract period.
8.2 Provision for termination before expiry of contract (for example breach of contract
and bankruptcy).
9. Arbitration provisions for settling major disputes.
10. Authentic text (that is evidence of which text is authentic if the agreement is written in two different languages).
11. Specification of the country whose law governs the contract.
Methods of motivating overseas agents :
1. Regular and fairly frequent personal contact with the agent:
1.1 Exporters' visits to the market.
1.2 Inviting agents to the exporter's headquarters.
1.3 Agents'/distributors' advisory councils. These can take the form of
conferences, holiday breaks and conventions paid for by the producer. They
are very successful as motivators and they allow agents to share experiences,
complaints and successes.
2. Assuring agents of long term business relationships with the exporter.
3. Provision of attractive commission and other financial incentives.
4. Attractive credit terms.
5. Provision of cheap development loans.
6. Local advertising, promotions and sales support.
7. Training for the agent's personnel in marketing, finance, stock control and so on.
8. Exclusivity.
8.1 Effective permanent communications - regular contact by telephone, telex,
company newspaper etc, providing up to date product and company news.
8.2 Threats to discontinue dealings.
Control of overseas agents :
1. Realistic expectations of performance are necessary'.
2. Contracts should be clear and mutually understood.
3. Performance should be analyzed in the light of changing environmental conditions.
4. Attention will need to be paid to the culture of the negotiating situation.
Own brand
Brand created and supported by a retailer (e.g. Marks and Spencer's St Michael brand), or generic term covering goods sold under the retailer's name (e.g. Safeway baked beans).Ozone-layer depletion
Caused by the discharge of CFCs in aerosols, solvents, foam plastics and fringes allowing through dangerous ultraviolet rays.
